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Wed 25 Jun 2008, 08:17 GMT

MASA comments on impact of rising bunker prices


MASA Chairman expresses concern over the continued increase in the price of marine fuel.

The Malaysian Shipowners Association (MASA) has said the rise in bunker costs is set to lead to future difficulties for the shipping industry.

MASA chairman Nordin Mat Yusoff expressed concern that bunker prices had risen by approximately 80 percent since last year, making up some 50 to 60 percent of total vessel operating costs. He said shipowners were left with little option but to raise freight rates or impose a higher fuel surcharge in order to cover costs.

“Over the years, shipping lines have been responding to the high cost of fuel by adopting a number of operational adjustments such as reducing speed of ships, consolidating services through multi-carrier alliances, consolidating routes to serve more locations with fewer ships, among others. But these are only operational and management approaches.

“The shipping and the logistics industry need to get together urgently to address structural issues in response to the soaring fuel cost and its sensitivity to transportation cost,” Nordin said.

Speaking about the effect of rising bunker prices on the Chinese market, Nordin pointed out that the shipping cost for trades between China and the United States had tripled since 2000. He warned that the competitive advantage of low production costs and cheap labour in countries like China was being offset by the rise in shipping costs as a consequence of the continued surge in the price of marine fuel.

“This means markets like China, which has the advantage of low production cost based on its cheap labour, will loose its edge,” Nordin said in a statement.

Prices at Malaysia's Port Klang have risen sharply over the last three months. The price of 380-centistoke (cst) fuel oil has risen by 28.8 percent from $509 per metric tonne on 26th March to current levels of $656 per metric tonne. 180-centistoke bunker fuel is now priced at $680 per metric tonne, 31 percent higher than March levels of $519 per metric tonne.

Marine Gas Oil (MGO) has seen the largest price increase and is now up 31.65 percent on the $976 per metric tonne price being quoted on 26th March. Indications yesterday were at $1285 per metric tonne.

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